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Stocks fall sharply on surge in oil, jobs data
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    NEW YORK — Wall Street plunged Friday on two troubling economic developments: oil prices that surged more than $9 a barrel to a fresh record and a jump in unemployment that was much larger than the market anticipated. The Dow Jones industrial average at times lost more than 300 points.
    The decline in stocks also helped drive bond prices sharply higher as investors sought a more secure place for their money.
    Crude oil has seen a huge rebound this week after falling amid a drop in demand for gasoline. The jump continued Friday; light, sweet crude set a high of $137.70 before edging down to trade up $8.83 at $136.62 a barrel on the New York Mercantile Exchange. The surge followed a Morgan Stanley shipping analyst’s prediction that would reach $150 a barrel by July 4.
    The soaring price of oil has intensified the market’s worries that ever-expensive fuel will lead consumers to curtail their spending on nonessentials. And because more than two-thirds of U.S. economic activity comes from consumer spending, oil is being seen as a threat to an already sluggish economy.
    The spike in energy prices comes as the Labor Department said the nation’s unemployment rate jumped to 5.5 percent in May from 5.0 percent in April. It was the biggest monthly increase since February 1986 and the rise leaves unemployment at it highest level since October 2004. Wall Street had predicted an uptick to 5.1 percent.
    The number of U.S. jobs shrank by a smaller-than-expected 49,000, but that development offered Wall Street little solace given that May marked the fifth straight month of jobs losses. Signs that the U.S. job market is deteriorating more than anticipated could thwart investors’ hopes that the economy is poised for recovery later this year. That notion has helped propel the stock market from its mid-March lows.
    The sudden rise in oil prices appeared to weigh most heavily on Wall Street, however, as some investors attributed a portion of the rise in unemployment to a rush of teenagers looking for summer work.
    ‘‘I think the biggest concern right now is oil and it’s potential for a stagflationary environment,’’ said Bill Knapp, investment strategist for MainStay Investments, a division of New York Life Investment Management. Stagflation occurs when stalling growth accompanies rising prices.
    In early afternoon trading, the Dow fell 291.56, or 2.31 percent, to 12,312.89 after being down as much as 311.11.
    Broader stock indicators also declined. The Standard & Poor’s 500 index fell 27.01, or 1.92 percent, to 1,377.04, and the Nasdaq composite index fell 49.56, or 1.94 percent, to 2,500.38.
    Friday’s pullback comes a day after the Dow jumped nearly 214 points, its largest daily point gain since April 18 because of better-than-expected sales from retailers and a dip in weekly jobless claims. The welcome economic news helped investors shrug off a more than $5-a-barrel spike in oil prices. But the further advance in oil on Friday was too much for investors to overlook.
    Bond prices jumped Friday after the weak jobs data sent investors scurrying for safety. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.92 percent from 4.04 percent late Wednesday.
    The dollar declined against other major currencies — a move that makes each barrel of oil more expensive. Gold prices rose.
    Knapp said that the stock market’s losses from the jump in oil and the jobs report Friday, while steep, have been somewhat more orderly than they might have been, say, in March when fears of a collapse in the banking system batted investors. He contends at least some investors are remaining cool because they believe some of rise in oil is unreasonable.
    ‘‘The supply demand dynamics just don’t warrant where we are today. It’s becoming incredibly hackneyed to say it’s all coming from demand in China,’’ he said. ‘‘I think the consensus is that something is going to come along to deflate this commodity bubble and put the stock market back on track.’’
    And worries about employment and oil may be intertwined.
    Ethan Harris, Lehman Brothers’ chief U.S. economist, contends that the employment report helped drive oil prices higher. He said traders are worried that the spike in unemployment would leave the Federal Reserve unwilling to raise interest rates. A notion of a Fed with few options combined with comments from the European Central Bank this week on the possibility of raising rates have hurt the dollar.
    ‘‘The weaker dollar is pushing up oil prices because oil is denominated in dollars and oil sellers want to be compensated for the weaker dollar,’’ Harris said, adding that he thinks the market’s moves have been overdone.
    ‘‘While I’m skeptical of the whole thing in terms of whether it makes sense logically, this is the way the market behaves. It’s like a Pavlovian response. If the Fed looks soft, oil prices go up,’’ he said.
    Still, Harris said that even allowing for some variations from seasonal fluctuations, the findings were grim.
    ‘‘The employment report was quite bad. You could argue that some of this rise was a big fluke related to teenagers entering the labor market. But that’s only part of the story. Most of it seems to be real. The labor market is very weak,’’ he said.
    Declining issues outnumbered advancers by about 4 to 1 on the New York Stock Exchange, where volume came 718.7 million shares.
    The Russell 2000 index of smaller companies fell 15.03, or 1.97 percent, to 748.24.
    Wall Street’s pullback weighed on Europe. Britain’s FTSE 100 ended down 1.48 percent, Germany’s DAX index fell 1.99 percent, and France’s CAC-40 lost 2.28 percent on the day. Japan’s Nikkei stock average closed up 1.03 percent; trading there ended before the release of the U.S. jobs report.

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